Brenda, the minimum contribution to a ROTH would be limited by your son's compensation.
Dickerson, you can direct deposit both to go right into your checking account. But be careful not to allow your cash flow to determine your standard of living. Sometimes this makes sense but other times it's better to live on less than your income for a while.
You may do a direct deposit to the account of your choice for social security. You may set up monthly withdrawals from your 401(k) check with your administrator to find out your distibution options. Martha
Brenda, keep in mind that the 401k is a retirement account, and that you shouldn't intend to utilize the funds for many years. If that is the case, you can afford to see the market decline in value today because you don't need the funds for a long time. If you don't intend to use the funds for 20 years, you can certainly afford to be more assertive with the funds than you would be if you need the money 3 years from now. Make sure your asset allocation matches your risk tolerance. Find a fee-only financial planner to walk you through this process.
We often recommend that clients direct all their cashflow into one investment account and then automate the amount they plan to spend each month as a "retirement paycheck" distribution. This leaves any excess building up in savings for a rainy day or to supplement a inflation adjusted retirement need.
Dickerson, where are you thinking about heading overseas?
Dickerson, check all banks that allow you to convert dollars to your new currency. Most charge 3%, but a couple charge less.
Savings bond post on time of holding comes from savings bond advisor website, it posted before I could give credit.
Dickerson, I may be a bit off your specific topic but just remember that Medicare does not follow you overseas so shore up your health coverage before you go. Happy Travels, sounds exciting!
Avid, what are the terms of your loan?
Avid, you still out there?
Again, if anyone is having technical difficulties with the comments, you can send an email to rdolan@kiplinger.com
Here's another one from Twitter in the meantime:
Twitter, can you provide more information about the loan? Interest rate, terms, etc.?
So, since education seems to be a hot topic today, do you have any advice you like to give students and their parents about saving for college?
Twitter, I would discuss this with your loan servicer, but loan payments would generally be applied to the principle which would in effect lower your interest payments.
Note that not all 529 plans are created equal. Find a state that has an efficient, low cost plan. I know Utah has a great plan that utilizes low cost Vanguard investments. Check it out at www.uesp.org. Also, you likely don't need to reside in Utah to take advantage of this program.
Paying principle helps reduce the dollar amount of the interest payments. So, I would advise paying principle only or in addition to interest. Paying interest only doesn't get him out of his loan any quicker. On a side note, how wonderful it is that you can help him.
Here's another user-submitted question: If I work for myself and collect a 1099, can I contribute to a Roth IRA since the money isn't post tax?
For parents looking at 529 plans, check out your state's plan for tax credits, invesment options and total fees. Vanguard plan through Utah is one we recommend as well. Vanguard is the king of low costs.
We also just got this from JeanO via email: I am retired taking income from IRAs and savings with a small part time job. Financially in great shape. I was thinking about changing from a financial manager that charges fees of about 1% over the mutual fund fees and changing to EFTs and lower costs indexes since our investments seem to follow the market anyway. What is the best way to transition to new funds when the market is up like it is now. What are the things to watch out for? We have stocks/bonds/cash of 60/20/20. Will find a fee only planner for once a year review. Thanks!
Great points Lon and Deb!
Yes, as long as you have taxable income, you can certainly contribute to a Roth IRA. Be aware of the income limitations, however. If you make more than $110k as a single filer, or $173k as married filing jointly, the amount you can contribute to a Roth starts to decline.
earned income = w-2 + 1099-MISC - SEP-IRA contributions - 50% of self-employment tax. Make sure that it's showing up on 1099-Misc since other 1099s include unearned income.
You may contribution to a Roth to the extent your have earned income. For the self-employed, that is income minus expenses. If the 1099 income is considered earning (that is even true fo some disability plans) it counts as earning to a Roth. You are limited to the maximum contribution amount based on your age. Martha
We love when we can start doing math equations in these chats! Are there any other essential "formulas" the chatters should know?
I also like this formula: Money(x) + Meaning(y) = Peace
JeanO: If your investments are in tax-advantaged accounts like IRAs or Roth IRAs, you can make the change from actively managed funds to ETF or index funds at any time with few concerns. However, if the investments are in a taxable account, be very aware of the capital gains implications that might arise from selling your current investments. Also, be aware that the value of a financial planner may not just be in selecting investments. Find a fee-only financial planner that helps with retirement and spending projections, ensuring you are adequately but not overly insured, making sure you are set from an estate planning perspective, and maybe most importantly, can help with behavior management to ensure you don't make mistakes based on short-term emotion.
JeanO, ETF index funds are great for certain categories. Since they are unmanaged, we are not using them for fixed income right now due to the heavy need for a manager to look out for credit changes and maturity of bonds. If all of your money is in retirement accounts, tax consequesces are not an issue for selling mutual funds. Noone can time the market, so trying to get the most profit out of he funds your manager has chosen is not advisable. Lon has added the consequences of taxable accounts, please read his post as well.
We also just got another question via Twitter from YC: Can I claim the american opportunity tax credit on my tax files for two years in a row? (2011 and 2012) I've only claim it twice?
Brenda, keep in mind that the 401k is a retirement account, and that you shouldn't intend to utilize the funds for many years. If that is the case, you can afford to see the market decline in value today because you don't need the funds for a long time. If you don't intend to use the funds for 20 years, you can certainly afford to be more assertive with the funds than you would be if you need the money 3 years from now. Make sure your asset allocation matches your risk tolerance. Find a fee-only financial planner to walk you through this process.
